Novo Nordisk stock jumped Monday after the Food and Drug Administration approved the company's obesity drug, Wegovy, as a treatment for a progressive liver condition called MASH.
MASH, or metabolic dysfunction-associated steatohepatitis, causes progressive scarring on the liver. Over time, it can lead to cirrhosis. Wegovy's approval as a MASH treatment came as expected. Novo's Wegovy will rival Rezdiffra, the only other drug approved to treat MASH. Small biotech Madrigal Pharmaceuticals sells Rezdiffra.
At the close, Novo Nordisk stock popped 3.8% to 53.77, while Madrigal shares reversed early losses and climbed 5.8% to 391.43. Madrigal stock has run up markedly this month, rising more than 29% as of Friday's close. Shares just broke out of buy point at 377.46 out of a cup base.
Leerink Partners analyst Thomas Smith doesn't expect Wegovy's approval to slow Madrigal's Rezdiffra launch. There are more than 23,000 patients on Rezdiffra within a year of the MASH drug's launch. That's a small portion of what Madrigal estimates to be a 315,000 population.
"While we believe incretins like Wegovy have utility in addressing some aspects of MASH, we expect polypharmacy and combination use leveraging multiple therapeutic classes will be the standard of care in MASH," Smith said in a client note.
Novo Nordisk Stock's Downfall
Still, the news is a significant boon for Novo Nordisk stock, which has plunged 24% since July 28. The company cut its sales and operating profit outlook for the year, citing continued competition with less expensive compounded versions of Wegovy.
The FDA's newest Wegovy approval comes on the back of a 72-week study. Roughly six in 10 patients, or 63%, who received weekly Wegovy shots reached steatohepatitis resolution with no worsening in liver fibrosis. On the flip side, 37% of patients showed fibrosis improvement with no worsening in the symptoms of their steatohepatitis. In both cases, Wegovy outperformed the placebo.
Smith noted one doctor, who oversees a large academic center practice in the U.S., sees patients with a metabolic-driven form of MASH to benefit from Wegovy. He estimates that represents about 80% of the MASH population.
"He envisions trying (Wegovy) first in this group of patients and reevaluating treatment response at one year, after which he would consider adding on Rezdiffra," Smith said. "In the 20% of MASH patients with a non-metabolic phenotype, he expects to prescribe Rezdiffra as the front-line agent."
Another key opinion leader, in May, said he expects to see a combination of Rezdiffra and/or Wegovy with the initial choice of treatment being heavily indexed based on body mass index, or BMI. In other words, patients with obesity and MASH are more likely to receive Wegovy than Rezdiffra.
Improving MASH Diagnosis Rates
Wegovy's approval in MASH is likely to help diagnosis rates, Smith said. Medicare doesn't cover the cost of Wegovy as a weight-loss treatment. Patients can only receive reimbursement for the drug if it helps lower their risk of heart attack, stroke or other major cardiovascular events.
Approval in MASH opens up another means of receiving Wegovy reimbursement.
"Given NVO's scale and therapeutic area focus, we expect a fairly broad outreach that extends well beyond the hepatologist/gastroenterologist specialists targeted by MDGL — into endocrinologist and perhaps even primary care in an effort to drive greater disease awareness and diagnosis," Smith said.
Diagnosing MASH is tricky as it doesn't present symptoms until later stages of the disease. Patients often have to undergo blood tests, imaging and sometimes a liver biopsy.
"This broader outreach should help expand the potentially addressable market for MDGL, as well as other development-stage MASH companies," he added.
Novo Nordisk Stock Remains Pressured
Smith doesn't rate Novo Nordisk stock, which is now trading well below its 50-day and 200-day lines, according to MarketSurge. Shares have a low IBD Digital Relative Strength Rating of 6. This means Novo stock has performed in the bottom 6% of all stocks over the past 12 months.
Madrigal stock, in comparison, has a strong RS Rating of 88, putting it in the leading 12%.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
